What is a tax haven?

The Anglo-Saxons have painted it very well with “tax-haven”, or rather, a tax shelter or port. The translation “tax heaven” (or fiscal paradise) is incorrect, because it has no meaning in English. We often connect the term “fiscal paradise” to the image of a heavenly white beach, shaded by luxuriant palms, inclined toward a turquoise-colored sea. In certain ways, that is often the way it is, but a fiscal paradise or tax haven is also an ideal place to establish one’s business affairs and to take refuge from the tax bite. Obviously, as in every undertaking, the presence of the owner is not necessary in the tax havens and, according to the laws of most of these countries, the companies can be managed from any part of the world.

A tax haven is a country that has a series of peculiar characteristics, the most important of which is minimal or non-taxation on foreign capital and foreign profits of its own citizens and/or companies. More than 200 jurisdictions actually exist that offer one or more incentives to resident or non-resident investors; some of these countries are also real vacation paradises. Depending on the type of activity that you desire to undertake, one tax haven or another will be appropriate for your specific case. In certain cases, especially for using a double imposition treaty, it is opportune to use the “Chinese box system” and operate a structure from one tax haven, through the structure of another.
The question of tax havens that for many aspects should be defined financial and corporate havens, was brought clamorously to the limelight after September 11th, because of possible ties between international terrorist networks and a few offshore financial centers (literally out from the coast, out of territorial waters and limits), and are now “under the microscope.” Just a few months earlier, in May 2001, the USA Secretary of the Treasury Paul O’Neill had declared instead that “the United States will not maintain any attempt aiming to impose on any country their level of tax imposition” and that the OECD project on tax havens was too extended. The Organization for Economic Co-operation and Development (from which the acronym OECD is derived), established in 1948, has, in the last few decades, extended its objectives toward economic and financial integration of the major countries of the so-called Western World.
The OECD project on tax havens has thus become an international reference point and the official position of the more developed countries on the question of “harmful” tax competition. In 1998 the Organization published a report on harmful tax competition entitled: “Harmful Tax Competition: An Emerging Global Issue”, where a distinction was made between “tax havens” and “harmful preferential tax regimes,” which has since been used as a reference point for the revenue authorities in the Western countries.
Of preferential tax regimes there are many and the United States themselves are one of them, because of tax incentives offered by some states like Delaware and Nevada. But the real tax havens are not characterized by just having a low or non taxation level—as the USA Secretary of the Treasury seems to think. In order to be able to individuate them, in fact, the report lists some conditions that must exist: no taxation (or at most a very nominal level of actual taxation); the lack of an actual exchange of information with other States and an absolute lack of transparency. To this must also be linked the lack of cooperation in case of laundering dirty money. On the basis of these criteria the OECD has in fact individuated 41 “jurisdictions” (countries or territories) definable as out and out tax havens (the same have been pointed out on the Revenue Office’s black list).
The OECD’s list, for once, didn’t have just one knowing character. In fact, the ’98 guidelines against harmful tax practices provides for the obliged removal of all benefits obtainable in the tax havens by December 31, 2005 at the latest without economic sanctions. Countries considered tax havens could send Advanced Commitment Letters—or rather, letters stating the intention to overcome harmful tax practices—by February 28, 2002 (the expiration date was then deferred to the middle of April); these letters were considered official commitments and would avoid, if kept, the punitive sanctions foreseen by 2006.
Between 1999 and 2002, thirty-four of the 41 countries sent Advanced Commitment Letters. The last seven tax havens, which for various reasons haven’t yet adhered to the OECD request: Andorra, the Marshall Islands, Liberia, Liechtenstein, Nauru, Principality of Monaco, and Vanuatu, still risk sanctions. In the last few years, almost all have capitulated, signing treaties for the “exchange of information” in the case of crimes related to terrorism, laundering, international trafficking, etc. and therefore, there no longer exists a tax haven that can be considered 100% secure, because there is nothing that can prohibit a magistrate from inserting a non-existent crime into an on-going investigation, with the only purpose to obtain information that he wants to have. Obviously, seeing that our business affairs are legal and that we are working from a tax haven, the risk of an exchange of tax information is almost non-existent. It doesn’t hurt, however, to maintain a high level of security data in your personal operations and possibly use various offshore centers for your operations. Let’s also remember that the OECD doesn’t represent even one third of the world—the third that wants to impose their rules on everyone.  

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